Indian Sovereign Credit Ratings Lowered.

   Moody’s Investor services lowered the Credit ratings of India Sovereign Credit rating for first time in last two decades, saying policymakers will face challenges to mitigate the risk of low growth.

The rating was cut by a notch to lowest investment grade with negative outlook to Baa3 from Baa2, according to statement. Baa3 rating is lowest investment grade just a notch above “Junk” status.

The rating firm stated, “The decision to downgrade India’s ratings reflects Moody’s view that the country’s policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,"

Other credit ratings agencies like Fitch Ratings and Standard & Poor’s have the lowest investment grade rating with stable outlook for India at present.A rating outlook is an opinion regarding the likely rating direction over the medium term. A negative outlook indicates that there is a higher likelihood of a rating change over the medium term.

A downgrade is bad news for companies and banks since it will raise their overseas borrowing costs. The downgrade comes at a time when the Modi government has been encouraging companies to raise foreign capital.

Well the top CFO have added that India should not be worried of the downgrade. India’s external debt increased by $85bn in past 5 years, but Forex reserves surged by $105bn. Financial Markets have completely ignored the downgrade as equities closed higher the day ratings were lowered.

 

CA Shubham Chhajed.